Functional Disability, Not Mere Physical Percentage, Determines Compensation: Kerala High Court Remands Employees’ Compensation Case for Medical Board Assessment

“Findings of Fact Under Section 30 Cannot Be Disturbed Unless Perverse” –  In a significant ruling clarifying the scope of appellate interference under the Employees’ Compensation Act, 1923, the Kerala High Court upheld the Commissioner’s finding on employer-employee relationship while remitting the matter for fresh assessment of functional disability through a competent Medical Board.

Justice S. Manu held that findings of fact by the Employees’ Compensation Commissioner cannot be interfered with in an appeal under Section 30 of the Act unless they are perverse or unsupported by evidence. At the same time, relying on the Supreme Court’s decision in Indra Bai v. Oriental Insurance Co. Ltd., (2023) 8 SCC 217, the Court emphasised that “it is the functional disability and not just the physical disability which is the determining factor” for awarding compensation under Section 4(1)(b) of the Act.

While dismissing the insurer’s appeal, the Court remitted the claimant’s appeal for reassessment of functional disability by a Government Medical Board and fresh computation of compensation.

The appeals arose from the order dated 29.12.2023 in E.C.C. No. 53/2021 passed by the Employees’ Compensation Commissioner, Thiruvananthapuram.

The claimant alleged that he was employed by the second respondent as a paid worker for operation and maintenance of a lorry bearing registration No. KL 8 F 9916. On 17.07.2019, while covering the loaded rice bags with tarpaulin inside the FCI godown at Karunagappally, he fell from the top of the loaded goods and sustained serious injuries. He underwent treatment and surgical procedures and claimed that he became incapable of doing any work, seeking compensation for permanent total disablement.

The employer filed a written statement admitting the employer-employee relationship and the accident. However, the insurer disputed the relationship and contended that the claimant was a paid worker of the FCI godown, not an employee of the lorry owner. The insurer also disputed the disability and the monthly wages claimed.

The Commissioner, after examining the claimant as PW1 and marking Exts. A1 to A11, found that there was employer-employee relationship, accepted monthly wages of Rs.8,000/-, and relying on Ext.A6 disability certificate issued by a Medical College doctor assessing 50% loss of earning capacity, awarded Rs.3,75,528/- as compensation with interest, along with Rs.1,22,635/- towards medical expenses.

The insurer filed MFA (ECC) No.22 of 2024 challenging the finding of employer-employee relationship, while the claimant filed MFA (ECC) No.80 of 2024 seeking enhancement on the ground that the case ought to have been treated as one of permanent total disablement.

Employer-Employee Relationship – A Jurisdictional Fact

The insurer argued that the finding regarding employer-employee relationship was based solely on the admission of the employer and lacked documentary proof. It also contended that its applications to summon records from the Kerala Headload Workers Welfare Board and wage registers were wrongly rejected, causing prejudice.

The High Court framed the substantial question of law as to whether the Commissioner erred in finding employer-employee relationship solely on admission without reliable evidence.

Justice S. Manu noted that the Commissioner relied on the oral evidence of the claimant, the admission of the employer in the written statement, and Ext.A11, the identity card issued by the Kollam District Goods Transport Workers Union.

The Court categorically held:

“Findings on facts by the Commissioner are not liable to be disturbed in an appeal under Section 30 of the Employee's Compensation Act unless they are without any supporting evidence or are perverse. Such conclusions are not liable to be substituted adopting a different view on the basis of same materials.”

Since there was evidence on record and no contra evidence was adduced by the opposite parties, the finding could not be termed perverse. The Court also found no illegality in the rejection of the insurer’s applications for summoning documents.

Accordingly, the substantial question of law in the insurer’s appeal was answered against it, and MFA (ECC) No.22 of 2024 was dismissed.

“It Is the Functional Disability and Not Just the Physical Disability” – Supreme Court Principle Reaffirmed

The more significant aspect of the judgment arose in the claimant’s appeal concerning assessment of disability.

The Commissioner had assessed 50% loss of earning capacity based on Ext.A6 certificate issued by a doctor from the Government Medical College. The claimant argued that he had suffered functional disability rendering him incapable of performing the work he was doing at the time of the accident, and therefore the case ought to have been treated as permanent total disablement.

The High Court referred to the Supreme Court’s ruling in Indra Bai v. Oriental Insurance Co. Ltd., wherein it was held:

“In light of the aforesaid decisions and the definition of the term ‘total disablement’… it is the functional disability and not just the physical disability which is the determining factor… Thus, if the disablement incurred in an accident incapacitates a workman for all work which he was capable of performing at the time of the accident… the disablement would be taken as total for the purposes of award of compensation under S.4(1)(b) of the Act…”

The Supreme Court had clarified that even if the medical disability percentage is lower, if the injury incapacitates the workman from performing the work he was doing at the time of the accident, it may amount to permanent total disablement.

Applying this principle, Justice S. Manu answered the substantial question of law in MFA (ECC) No.80 of 2024 in favour of the claimant.

Need for Medical Board Assessment – Remand Ordered

However, the Court also found merit in the insurer’s submission that the claimant had not been examined by a Medical Board and that Ext.A6 was issued by a single doctor.

In the interest of justice, the Court directed that the claimant be examined by a competent Medical Board of a Government Hospital. The Commissioner was directed to assess the functional disability based on the medical board’s report and determine the compensation afresh.

The Court ordered:

“On obtaining the report of the medical board the learned Commissioner shall assess the functional disability and determine the compensation afresh on the basis of the same.”

Thus, while upholding the legal principle that functional disability governs, the Court ensured procedural fairness by directing a comprehensive medical evaluation.

The Kerala High Court’s ruling strikes a balance between limited appellate interference under Section 30 of the Employees’ Compensation Act and the substantive right of a workman to be compensated based on functional disability.

The insurer’s appeal challenging employer-employee relationship was dismissed, reaffirming that factual findings cannot be disturbed unless perverse or unsupported by evidence. At the same time, the claimant’s appeal succeeded to the extent that the matter was remitted for reassessment of functional disability through a competent Medical Board, in line with the Supreme Court’s decision in Indra Bai.

Date of Decision: 18/02/2026